ACIT, NEW DELHI vs. SH. DUSHYANT KUMAR JAIN, DELHI

The brief facts of the case are that during the year under consideration, the assessee had paid an amount of Rs. 36,97,401.59 as ITA 1468/Del/2016 Assessment year 2011-12 commission to foreign parties. The AO noted that TDS had not been deducted as per provisions of section 195 (1) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) and, therefore, the amount of commission paid was added to the income of the assessee under section 40 (a) (i) of the Act. The assessee preferred an appeal before the Ld. first appellate authority who deleted the addition after relying on certain judicial precedents. Now, the Department is in appeal and the following grounds have been raised in this appeal:-

The Ld. departmental representative submitted that the Ld. CIT (Appeals) had wrongly deleted the addition and submitted that the right to receive the commission arose in India only when the sales orders were executed by the assessee in India. It was submitted that the fact that the agents had rendered services outside India in form of soliciting the orders and commission was remitted to them abroad was wholly irrelevant for determining the place of accrual of their income. The Ld. DR vehemently argued that the Ld. CIT (Appeals) had deleted the addition without considering the facts of the case.

The Ld. Authorised Representative placed reliance on the order of the Ld. CIT (Appeals) and also on order of ITAT Delhi Bench in the case of Divya Creation versus ACIT reported in (2017) 86 ITA 1468/Del/2016 Assessment year 2011-12 Taxmann.com 276 (Delhi – Tribunal) wherein vide order dated 14/09/2017, an identical issue had been decided in favour of the assessee. Reliance was also placed on another order of ITAT Delhi Bench in the case of Le Passage to India Tours & Travel (P) Ltd vs. DCIT reported in (2015) 54 Taxmann.com 138 (Delhi-Tribunal) which was also on an identical issue.

We have heard the rival submissions and have also perused the material on record. The facts in this case are not disputed at all. The Ld. CIT (Appeals) has discussed the facts of the case in light of numerous orders of the ITAT/judicial precedents and has reached the conclusion that undeniably the parties to whom the impugned payments were made were residents outside India, the exhibitions conducted by those agents on behalf of the assessee were also held outside India and the income from commission to those parties accrued outside India since no services were rendered in India. The payments were made also outside India and, therefore, no income could be deemed to accrue or arise in India. Apart from the judicial precedents relied upon by the Ld. CIT (Appeals) while allowing relief to the assessee, we also find that the Ld. AR’s reliance on the case of ITA 1468/Del/2016 Assessment year 2011-12 Divya Creations versus ACIT (supra) of ITAT Delhi Bench and on the case of Le Passage to India Tours & Travel (P) Ltd vs. DCIT (supra) of ITAT Delhi is also well placed. The ITAT Delhi Bench in these cases has held that retainer-ship charges and commission paid by the assessee to overseas non-resident agents for promoting assessee’s business in foreign countries was not in nature of fees for technical services and was, therefore, not liable to be taxed in India and further that since the foreign agents had their offices situated abroad and, moreover, the services were also rendered outside India, the payments made to them did not have any tax implications in India.

In the final result the appeal of the Department stands dismissed. Order is pronounced in the open court on 27th December, 2017.